BC Hydro CEO Bob Elton told the business community in the city of Nanaimo on Vancouver Island Thursday that the utility company plans to take a C$120 million (US$89 million) charge against earnings this year for the stalled Georgia Strait Crossing (GSX) gas pipeline project and the gas-fired 265 MW Vancouver Island Generation Project (VIGP), which was rejected by British Columbia regulators last fall as being too costly (see Daily GPI, Sept. 15, 2003).

The British Columbia Utilities Commission (BCUC) denied the C$370 million (US$285 million) power project, which was intended to be an anchor customer for gas deliveries via GSX, and told the utility to look for a lower-cost plan through a call for tenders process. Five alternative prospects stepped forward during a hearing on GSX and VIGP. None would rely on the new pipeline, which is a partnership between BC Hydro and Williams Gas Pipelines Ltd.

“Concerns that supplies of natural gas in North America are being depleted — and will need to be supplemented by supplies from remote areas, offshore and non-conventional resources — support the view that gas prices are likely to continue at recent broadly higher price levels,” the commission said. It confirmed that there will be a future power capacity shortfall on the island and that the utility should move expeditiously to reinforce electricity supply before the 2007-08 winter. But it also said it has found that the need for new supply resources would be about 100 MW less than BC Hydro’s forecast for 2007-08.

The fate of BC Hydro’s pipeline and power projects will be decided by a call for tenders process this fall. “Which approach is taken and what the impacts are will not be known until after the conclusion of the call for tender process in the fall,” said Elton, noting that the “next key date is Aug. 13.” BC Hydro will award an energy purchase contract to the winning tender offer on Oct. 8.

He said the charge against earnings does not mean the company is giving up on the two projects. “We are just as conservative about our financial obligations as we are to our obligations to serve,” Elton said. “We examined the status of both GSX and VIGP relative to what is required under generally accepted accounting principles and decided that conservative action was necessary to continue to meet GAAP.” He said the charge reflects the “uncertainties as to the projects proceeding or the costs being recovered.”

BC Hydro already has filed an application with the BCUC for approval of a designated regulatory account for the costs associated with the GSX and VIGP projects and plans to seek to recover those costs in future rates “when VIGP is brought into service or it is determined that the projects will not proceed,” said Elton.

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